Joe Klobus, Insurance & Claims Specialist for OEC Group’s Northeast Region, discusses the one area where cargo insurance is often overlooked…after your cargo has been unloaded.
What kind of risks does cargo face while berthed and being unloaded or while being held within the port itself?
Unfortunately for shippers, there are a litany of issues. Fire is one of the most prominent dangers for vessels at sea, for vessels docked and being unloaded, and even for containerized cargo waiting within port grounds. I’m sure you all remember just a month ago there was a tragic fire aboard a roll-on roll-off vessel being unloaded in Newark that claimed the lives of two firefighters. Not only did that incident result in loss of life, but it also put dozens of firefighters and salvers at risk, and total damages to the ship, its contents, and the port have yet to be calculated. Theft is a common problem for freight that has been unloaded and waiting to be picked up from a gateway port or intermodal hub, and we’re seeing increased reports of that kind of theft coming out of rail yards around LA-Long Beach.
Has there been an increase in cargo fires?
We seem to be seeing more of these cargo fires, especially since 2022, but they have always been a serious risk factor in our industry. The fire in Newark was on a roll-on roll-off vessel carrying used cars, and automobiles in particular have been an area of concern for fire risk. The cause of the fire in Newark has not yet been declared, but in the industry in general, the influx of electric vehicles poses a variety of new issues. Batteries used in EVs are liable to combust, and fires started by those batteries are extremely resilient to firefighting efforts. On top of that, the way current sprinkler and fire safety systems are set up, they have a hard time targeting fires from EV batteries commonly located near the underside of the vehicle. We don’t know if this had anything to do with the Newark situation, but it’s something to be aware of.
In addition to training, what else should shippers look for to ensure their products maintain their integrity throughout the entire air shipping process?
Partnerships are a key part of the proper pharmaceutical shipping process, and anyone looking to ship pharmaceutical products should work with companies that are deeply connected. The reason is, this type of cargo requires specialized care, meaning providers need access to truckers, final distribution networks, and air cargo providers that have their own qualifications and experience in shipping that kind of specialized freight. It’s difficult for providers to earn those industry connections.
Can you describe the nature of the uptick in theft at the Port of LA-Long Beach?
The reports we are seeing outline an increase in cargo theft specifically from rail cars making intermodal trips from LA-Long Beach inland. Individuals on the ground at rail yards outside the Port of Los Angeles are observing random and disorganized instances in which thieves break seals on containers, look inside, quickly decide whether or not there’s anything that would be beneficial for them to resell, and either take something or move onto the next container. Auto parts and electronics are two common commodities that can be quickly identified and taken.
Is there anything logistics providers can do about this?
Not directly, no. For theft in specific places like LA-Long Beach, and to some extent New York-New Jersey and Savannah, rerouting solutions are available, but alternative routes generally cost more. While rerouting is definitely an option, it’s rarely the most cost-effective choice. In the end, from a cost perspective, you’re almost always better off importing through ports like LA-Long Beach, New York-New Jersey, and Savannah with a cargo insurance policy.
How can insurance be effective in this situation?
The right insurance policy can completely remove the financial risk associated with increased theft and vessel fires. A policy that covers both common risks, usually included in what most providers call “all-risk” coverage, would prevent the shipper or cargo owner from having to deal with the cost of damages and the prolonged legal processes that follow either incident. Once the cargo has been identified as stolen or damaged in a fire, the cargo owner files a claim for that cargo, and, with the right policy and the right provider, that claim would be processed immediately. To understand exactly what is covered under your existing policy, or to get a new policy that does cover these active issues, I strongly suggest you work closely with an insurance expert.
What advice do you have for shippers in the face of these upward trends?
There are always going to be certain issues that are particularly risky, and right now, fire and theft are those prominent concerns. It’s best for every shipper to work with their provider, understand their routes and the risks that come with them, and make sure they develop an insurance policy alongside an insurance expert that works for their specific situation.